What is a dormant account?

A dormant account refers to a bank or financial institution account that has remained inactive for a prolonged period. This status applies when there have been no deposits, withdrawals, or other customer-initiated transactions for a specific duration, typically ranging from six months to several years, depending on the institution’s policy. Dormancy is a protective measure that helps financial institutions manage unclaimed funds and protect customers against fraud or misuse.

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How an Account Becomes Dormant

The process of dormancy begins with a period of inactivity, during which the account holder does not perform any financial transactions. These transactions may include deposits, withdrawals, online banking activity, or loan repayments. Once this inactivity exceeds the period specified by the institution’s guidelines, the account is classified as inactive. If no action is taken for an even longer period, the status is escalated to dormant. Institutions usually notify customers in advance to try and prevent dormancy.

Legal and Regulatory Framework

Financial regulators in many countries, including Kenya, have set clear guidelines on how dormant accounts should be handled. These regulations require financial institutions to report dormant accounts and, after a specific time frame, surrender the unclaimed balances to a central authority such as the Unclaimed Financial Assets Authority (UFAA). This move ensures transparency, accountability, and offers a centralized recovery process for rightful owners or their next of kin.

Implications for the Account Holder

When an account becomes dormant, the customer temporarily loses access to services such as withdrawing money, applying for loans, or earning interest or dividends. The account may also be subject to maintenance or dormancy fees, and reactivation might require the account holder to visit the institution in person with relevant identification documents. Additionally, if the dormancy continues for years without action, the funds may be transferred to the government’s unclaimed assets registry.

How to Reactivate a Dormant Account

Reactivating a dormant account usually involves submitting a formal request to the financial institution and providing identification documents, such as a national ID or passport. Some institutions may also require the account holder to fill out updated Know Your Customer (KYC) forms. Once verified, the account is reactivated, and normal operations can resume. In some cases, especially when the funds have already been transferred to a government agency, the account holder may need to initiate a claim process through the relevant authority.